The models affected include the VW Jetta, Beetle and Golf from 2009 through 2015, the Passat from 2014-2015 as well as the Audi A3, model years 2009-2015. Owners of the "CleanDiesel" automobiles have filed a class action lawsuit against Volkswagen.

The company said it was not aware of any similar issues outside the U.S.

"At this stage it's only in the U.S., we know the tests are different in the U.S. and we also know we have never had any recalls over this issue in the U.K. and Europe," said Volkswagen spokesman Paul Buckett.

Authorities in Germany ordered the country's carmakers to come clean on the scale of emissions manipulation. "This is a case of blatant consumer deception and environmental damage," said Jochen Flasbarth, the German government's senior environment official.

Volkswagen's recent global growth has not been matched in the U.S., where the group's market share has shrunk to 2% from 3% in 2012, Lee said.

The U.S. accounts for just 6% of Volkswagen group sales, but the company had been banking on its diesel cars to give it a boost.

Volkswagen has enjoyed a reputation for reliability and quality engineering and that will be damaged by the scandal. The automaker could face fines of up to $18 billion -- or $37,500 for each car that did not comply with legal standards.

CEO Martin Winterkorn, who survived an attempt to remove him from his position earlier this year, apologized to customers on Sunday for breaking their trust.

Some analysts say his position at the top of Volkswagen may once again be under threat because of the scandal.

"No question that this is a big problem for Volkswagen and could lead to CEO Martin Winterkorn losing his job after all," said Christian Stadler, a professor at Warwick Business School.

The group's board is meeting on Friday to decide whether to renew Winterkorn's contract until 2018.